Note: this is also available for members in PDF format in the PA Members Section of the Website under "Announcements" : http://www.mseia.net/MEMBERS/
Given by Maureen Mulligan-PASEIA Lobbyist, Sustainable Futures Communications
July 28, 2010
Thank you Chairman Sturla and the Majority Policy Committee for your interest in alternative energy and solar energy in particular. My name is Maureen Mulligan and my energy consulting business is Sustainable Futures Communications. I have represented the two major solar trade associations: Pennsylvania Solar Energy Industries Association, a division of Mid-Atlantic Solar Energy Industries Association and the Solar Alliance since 2003, shortly before the original Alternative Energy Portfolio Standard (AEPS) became law in 2004. Thank you for advancing solar energy and other renewable energies in our state through your legislative efforts over the last several years. Between the two organizations, I represent more than 60 solar businesses, many of whom are currently operating in Pennsylvania, while others are awaiting the outcome of House bill #2405 or similar legislation before entering the Pennsylvania market.
First, I would like to briefly review some of the benefits of solar energy:
· Solar deployment can help avoid costly transmission line upgrades and help alleviate grid congestion.
· Solar helps break our reliance of foreign energy sources coming from unstable countries unfriendly to the US. In addition, centralized power plants are more vulnerable to security breaches and can be targets of terrorists.
- Solar is a clean, reliable locally sourced energy and creates more jobs per megawatt than any traditional form of energy. All 67 counties in Pennsylvania have enough sunlight to benefit from solar development. Germany, the world leader has less solar insolation than anywhere in our state.
· Solar serves as a hedge against increasing fossil fuels prices and volatility in the market. Costs for coal and oil as rising as more fossil fuels are exported to China and India.
· Solar development is a new source of tax revenue for the state.
· Since solar is almost perfectly coincident with peak energy demand in our region and has zero fuel costs, it can force downward pressure on wholesales and ultimately retail rates, which result in savings to consumers. Electricity prices are most expensive during peak usage periods such as on the hot, sunny, days like the ones we’ve being having this summer. This is exactly when solar is most efficient and operating at peak performance.
The rest of my testimony will address two legislative efforts that will help continue the incredible growth in solar, and help retain our state’s leadership role in advancing solar energy. At the time of passage of Act #213, (AEPS) there was only one other state with a separate solar share in their portfolio standard. Solar businesses started looking to invest in Pennsylvania but at that time we lacked incentives and the requirement for utilities and electricity generation suppliers to purchase solar renewable energy credits did not take effect until after the utility rate caps expire. Now, of the 29 states plus the District of Columbia with portfolio standards, 16 of those states + DC have solar shares. Half of those 16 states solar shares are now larger than Pennsylvania’s. In a few short years, we have fallen behind and so will solar business investment in Pennsylvania. (NJ, DE, MD, IL, CO, NM, AZ and NV have more robust solar shares). Delaware’s Governor Merkell is signing another pro-solar, pro renewable energy bill today that will advance Delaware even further ahead of Pennsylvania.
Before Act #1 passed in 2008 which provided $180 million for solar; there were fewer than 20 solar installers in Pennsylvania, most of who did not work at it full time. In just as little over a year, Pennsylvania attracted over 600 solar businesses and individuals qualified to install solar photovoltaics and solar thermal energy. Technological advances, investment by the industry and federal government in research and development, increased efficiencies in assembly production and manufacturing, and a more skilled workforce are bringing solar costs down but, the solar marketplace is young and there are challenges despite advances.
So where are we with solar in Pennsylvania? Act #1 of 2008, which provided $100 million dollars for the development of residential and small business solar grants run by DEP, is almost fully subscribed, as is the Commonwealth Financing Authority’s $80 million for large scale solar projects. At CFA’s July meeting, the last of the program dollars for grants and loans were approved. Both of these programs have been well-run and enormously successful at advancing solar energy in our state. It was hard to imagine in 2004 when the AEPS passed, that the demand for solar would be as high as its’ been. Even in today’s economic climate, solar is growing and so are the associated jobs. Along with solar development comes well-paid, local jobs in diverse fields such as engineering, sales, finance, construction, to name a few, and these jobs are not unlikely to be outsourced. In addition, DOE recently announced Pennsylvania won a $2 million dollar grant over three years to develop a multi-state solar training center through Penn State University and the Philadelphia Naval yard designed to train the next solar workforce for New Jersey, Maryland, DC, Delaware, Virginia, West Virginia and Pennsylvania. It would be a shame if Pennsylvania loses our newly trained workforce because we have fallen behind neighboring states.
The solar industry is not seeking additional grant and loan money from the state. We are well aware of the budget constraints facing Pennsylvania and other states. The industry is seeking legislative relief in the form of good policy to further transition from a rebate/grant dependent resource to a market driven one. There is an urgent need to enact policies such as those in HB #2405. These policies include: redesigning the solar requirement to develop more solar now while there are dedicated incentives to complete already approved projects; extend the solar share out into the future to remain competitive with surrounding states; support long term contract language; set a firm alternative compliance payment, and advance lower cost solar thermal energy. I will talk about each of these issues briefly.
Without long term contracts, costs for the exact same solar installation will be higher because investors will demand more security, if they are even willing to finance projects. The RECs market lacks liquidity. Banks question whether the solar renewable energy credits (SRECs) market has “staying power” making financing difficult. SRECS account for almost two-thirds of the revenue stream for most large scale solar projects so long term contracts are essential to solar financing. If projects aren’t built because of the lack of long term contract availability, the result could be high compliance payments and no real benefit to Pennsylvania. Contract procurement has historically been limited to short term; around three years. Solar requires ten year or longer attracting both project financing and customers.
Along with long term contracts, there needs to be a change in how the alternative compliance payment is set. Banks and other investment companies are not interested in financing something that is “200 percent of the regional market value”. That’s too nebulous. At a time when capital markets are tight, both customers and banks need to know what revenue they can count on from the sale of the renewable energy credits. Solar businesses often have to pay a premium for capital if they can get financing at all, because the value of the solar renewable energy credits is uncertain. Setting an alternative compliance payment (ACP) and allowing for long term contracts helps with financing and lowers lenders’ risks. The language in HB #2405 fixes that problem and ensures consumers don’t overpay for solar. If these issues aren’t remedied soon, Pennsylvania will be faced with projects that have been approved but unable to be completed. In addition, the requirement now and in the next few years is much lower than the projects already approved for development. HB#2405 would have increased the solar share from 0.5% to 3.0% by 2025. At the time the solar share was determined in 2004, the requirement was set at very modest levels in the early years because there were no incentives driving the market. Today, due to technology and other advancements that lower the cost, the solar industry is able to fill a much higher demand. The chart below illustrates the problem.
In addition to changes to the 2004 AEPS, alternative financing programs such as the Property-assessed clean energy, (PACE) finance mechanisms sweeping the country are an important market development that will make solar, energy efficiency and other small scale renewable energy options more financially assessable to homeowners and commercial businesses. To date, twenty-three states have passed enabling legislation which would allow local government entities to issue bonds for the purpose of financing renewable energy and energy efficiency improvements through local property tax assessments. States and local governments across the country have been moving forward with PACE in order to take advantage of the $100 million dollars in ARRA money that has been secured for PACE development. There has been limited private market development of these loan funds although AFC First Financial has had very successful solar and energy efficiency loan programs. PACE would provide another option for consumers.
The solar industry and the energy efficiency businesses and non-profits that I represent would welcome PACE financing opportunities to Pennsylvania and support Representative Matt Bradford’s House bill #2525. I know much work and effort to engage the business, environmental and other stakeholders has been done by him in order to introduce the best possible bill. HB #2525 is broad enough to allow municipalities to design their own programs yet specific enough to give clear guidance. One suggestion from both of these groups would be to clearly define qualifying renewable energy technologies as well as energy efficiency technologies to avoid a mish-mash of technologies qualifying under the PACE program. This can lead to consumer confusion especially when state and federal programs may already have different qualifying resources.
It is our hope that concerns raised by Fannie Mae/Freddie Mac on senior lien position to a mortgage can be quickly resolved so there are more options to fill the growing consumer demand for renewable energy and energy efficiency now that grant money is almost exhausted, at least for solar.
In conclusion, if HB #2405 can not pass the House and Senate this fall, the solar industry strongly suggests a solar only version of the bill that we believe has legislative support, and will help provide the necessary tools now to continue solar development in Pennsylvania.
Thank you for this opportunity.